Daily Market Newsletter

March 28, 2019

Non-Directional Strategies

Semi-Directional Strategies

Directional Strategies

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Market Commentary

So far we haven’t seen any Window Dressing to end the quarter; could we see something over the next day or two? Mario Draghi had a somewhat dovish report out today, totally in line with the plummeting rates that we’re seeing on the ten year note. It looks like the rate rally that we had since the 2016 election is over as the weekly chart is now printing a lower high/lower low change of polarity. Fed Fund Futures are now pricing in a 41% probability of a rate cut by December.

You might ask yourself, “why aren’t stocks diving right now with this dire forecast?” And the answer would be low rates; just like the QE years of 2010 – 2014, low rates tends to drive capital to yield. We are also still dealing with that exhausted weekly chart, so our LP Condor is doing well.

Remember “tops are a process” and it might take some time before price really releases in one direction or another.

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Offensive Actions

Offensive Actions for the next trading day:

I’m going to place a SPY 17APR put spread as described in the “swing” section below.

Defensive Actions

Defensive actions for the next trading day:

Any vertical, butterfly, or diagonal debit spreads that we set up are risk-managed from day one, and no defense is really required.
Closing orders have been entered for all new spreads.

Strategy Summary Graphs

Each graph below represents a summary of the current performance of a strategy category. For an explanation of what the graphs mean, watch this video.

Non-Directional Strategies

Semi-Directional Strategies

Directional Strategies

Technical Analysis Section

Market Internals: Volume was below-average today and breadth ended the day relatively positive with +252 advancers minus decliners.

SPX Market Timer : The Intermediate line fell below the Upper Reversal Zone, now showing a neutral bias. A weak bullish cluster was showing on the two weaker timeframes after last Friday, this is a leading signal for a bounce. This chart is once again one big rally day from a full bearish cluster.

DOW Theory: The SPX is in a long term uptrend, an intermediate uptrend, and a short-term downtrend. The RUT is in a long-term uptrend, an intermediate downtrend, and a short-term downtrend. The Dow is in an intermediate uptrend and short-term downtrend.

VIX: The VIX fell to 14.49 after peaking at 50.3 a year ago, inside the bollinger bands. The RVX fell to 18.49 and is inside the bollinger bands.

Fibonacci Retracements: The price has moved through several important Fib levels and is not caring about any confluence levels that these present. The recent retracement did not even get to the 23.6% fib retracement. We’ll see if fibs start to matter again.

Support/Resistance: For the SPX, support is at 2700 … with overhead resistance at 2941. The RUT has support at RUT 1500 with overhead resistance at 1600 and 1742. The S&P500, Russell 2000, and Nasdaq 100 have all printed a Death Cross with the 50ma crossing below the 200ma; this can be a leading signal for a true Bearish move. It can also signal “false” and create a massive swing higher. We might be seeing the latter scenario as the Dow has now printed a Golden Cross, to be followed by the SPX any day.

Fractal Energies: The major timeframe (Monthly) is charged again, with a reading of 59. The Weekly chart has an energy reading of 28, in exhaustion from the uptrend. The Daily chart is showing a level of 49 which is almost recharged. These readings say that we should expect at least a couple of weeks of choppy price behavior.

Other Technicals: The SPX Stochastics indicator fell to 68, mid-scale. The RUT Stochastics indicator flattened at 50, mid-scale. SPX MACD histogram fell below the signal line, showing a loss of upside momentum. The SPX is inside the Bollinger Bands with Bollinger Band support at 2749 and resistance at the upper band at 2856 with price is below the upper band. The RUT is back inside the Bollinger Bands with its boundaries at 1503 to 1588 and price is above the lower band. The price is starting to release after the recent Bollinger Band squeeze.

Position Management – NonDirectional Trades

I have no positions in play.

No additional trades for now.

I have the following positions in play:

SPX 2725/2730*2860/2865 Iron Condor (3/25) entered for $2.60 credit per this weekend’s advisory. My goal is to remove this trade for a 25% return on risk. This would be a closing debit of $2.00 or less.

We are using this newfound vol to sell into as we anticipate a couple of weeks of difficult chop.

I have no current positions:

Calendar spreads are good for markets in quiet/trending character, but not sideways/volatile which might be coming next. If the market reverts back to quiet/trending, then I’ll look to continue this method.

The calendar spread tracking sheet is available for your download here. Yes, if you follow the math in the sheet, all of the numbers account for commissions in and out of the trade. Please note: If you trade these positions please keep the size small, to the point where you “do not care” about the success or failure of this position.

I have the following positions in play:

SLV Stock – I have 1000 shares of the SLV that was assigned at the $15 level. I currently have the SLV 18APR $15.5 calls (2/11) for a $.17 credit.
EBAY 26APR $34 puts (3/11) sold for $.73 credit. I will look to remove this trade for a $.10 debit.
PFE 17MAY $39 puts (3/18) sold for $.39 credit.

No additional trades at this time.

Position Management – Directional Trades

Thoughts on current swing strategies:

8/21 EMA Crossover – Looking for the next signal.
RSI(2) CounterTrend – None at this time.
Daily S&P Advancers – Looking for the next signal to go long when we have single-digit advancers on the ADSPD.
Swing – I will place a SPY 17APR debit put spread, $1-wide tomorrow morning, for <$.50 debit, and will look for a 50% return from this trade. Keep position size small .

Crypto has had relative strength over the last few weeks and no one believes this rally.

Investors should currently be looking to find technical entries to warehouse BTC/ETH/LTC assets for eventual trades on Alt-coins. You should also be looking to devices like “trezor” or other cold-storage devices to keep your assets off of the network, or other secure wallet such as Navcoin. Relying on the security of your broker is no longer good enough; no one can log into your ETrade account and “steal” your stock assets, but the whole nature of Cryptocurrencies and their portability means that someone can grab your assets and transfer them elsewhere. I will continue to discuss the tradingview platform in daily videos as I think that it is currently the best way to chart the “big three.”

From Friday’s close at SPY 279.25, there is a +/-5.268 EM into this coming Friday; this is significantly larger than last week’s 3.382 EM. The EM targets for this Friday’s close are 284.52 to the upside, and 273.98 to the downside.

So far, not much of an attack on either EM limit.

I will start playing directional bear spreads once we see upside exhaustion on more than one timeframe.

The scan that I discussed in the 8/4/2018 video is available to download for thinkorswim here: http://tos.mx/OvdVnz I will also be adding a second Larry Connors scan to this section as well; here is the Connors Crash scan: http://tos.mx/BhHuKL

I have the following positions in play:

UPS 29MAR 112/113 Debit Call Spread (3/4) entered for $.50 debit. This one got run through by FDX’s outlook. We might see if it’s possible to harvest anything out of this trade in the next day or two.

I think last Friday’s reaction was a warning to step back from longs for a bit.

The “Hindenburg Strategy” is meant to capture “value” from successive corrections that lead up to the final “death spiral” with a Bear Market. The basic principle is to buy 3-month out long puts on the SPY, and to finance those puts by the sale of credit spreads.

I have no positions at this time. I cleared out the most recent set of puts on the drop to the 200ma back in October. I will “reload” again soon, if/when the weekly chart goes into upside exhaustion. The three-month puts are coming down in price closer to what I’d prefer to pay. (3 months out/90% of current value)